Fha Loan Limit Raised

More People In Market

For many years, the limit on Federal Housing Administration loans was $78,000. That was raised twice during the past decade and last January, it was pushed $12,000 to $113,050.

The move has been greeted with near-universal approval, especially in the lending community.

"It was a big increase and was long overdue," says Kenny Martin, assistant vice president and branch manager at Margaretten and Co. in Newport News. Martin lives in Williamsburg and handles accounts there.

"Raising the limit brings more people into the market," says loan originator Layton Brenegan of Newport News Savings.

And Williamsburg Bay Savings branch manager Jim Minton says "it should be a big help. Before Williamsburg couldn't take advantage of lower loan rates because its prices for homes are higher than others in this area. Now the limit better reflects prices."

He says there hasn't been any immediate reflection of increased buying for homes within the limits, "because the market is slow, but the change has provided a better attitude among Realtors. Now, we'll just have to wait until the market opens up to see how much of a total effect there is."

As for rates, "they're stable," says Minton. "They're at a standstill and I don't anticipate a change in the near future."

Martin believes a number of potential home owners will fall into the new boundaries. "Recently, I sold a $110,000 home and the people only needed $7,500 to close. That includes everything. Normally, they would have needed $10,000 to $11,000 on a conventional loan of that type.

"So, it's helped a lot."

He does concede that "not many homes in that range are available. They're either in the $60,000 to $90,000 and an existing home or more than $130,000.

"Ones that are selling quickly are going FHA." He mentions Berkeley's Green and Powhatan Crossing in particular, pointing out that at the former, homes cost more than $130,000 "but more than 40 were sold last year." Now, he says, Powhatan Crossing "is selling pretty quickly."

He also says first-time buyers aren't necessarily the ones helped most by the limit change.

"Lots of people buying in that range are trying to get rid of townhouses and can't. That slows the process down, but the change will help a lot in the long range."

The move also is to enable more to borrow with as small a down payment as possible. Now, says Brenegan, those with a smaller down payment can borrow three ways.

One is through the Veterans Administration, which requires no down payment.

A second is through the FHA, where the loan pays for insurance coverage through the Mortgage Insurance Program. The third is through a private lender, where a fee is paid.